Posts Tagged 'household production'

The Nobel Prize winner Simon Kuznets presented an original set of estimates to Congress in 1934 that contained a number of caveats about what was omitted from the calculation of national income (and later from the calculation of gross domestic product) that made it an imperfect measure of welfare. One of the principal omissions that he cited was the “services of housewives and other members of the family.” Although the hours men contribute to “household production” have risen, while those of women have declined, it is still true that the exclusion of household production—of men or women—causes a significant understatement in the level of domestic production. Turns out, Mr. Kuznets was correct. New research by the Bureau of Economic Analysis has found that if the value of household production were included in gross domestic product (GDP), it would add approximately $3.8 trillion to the U.S. economy in 2010.

A research paper published in the May issue of the Survey of Current Business found that if “home production”—the value of the time spent cooking, cleaning, watching the kids, and so forth—were counted, it would raise the level of nominal GDP nearly 26 percent in 2010. Back in 1965, when fewer women were in the formal labor force and more were working in the nonmarket sector, GDP would have been raised by 39 percent. Because the inclusion of “home production” would add more to the level of GDP in 1965 than in 2010, factoring in the value of these nonmarket activities was found to reduce the average annual growth rate of GDP over this period.

The paper also found that in 1965, men and women spent an average of 27 hours a week involved in “home production” activities, such as housework, cooking, odds jobs, gardening, shopping, child care, and domestic travel. By 2010, they spent 22 hours a week on such activities.

The overall decline in hours occurred as the amount of time women spent on household activities fell to 26 hours a week in 2010, from 40 hours in 1965, as more and more women took jobs outside the home. While women’s hours have dramatically dropped over that period, men’s hours dedicated to household activities rose slightly to 17 hours a week, from 14, over that same period.

Interestingly, the 2007—2009 recession had little impact on the number of hours U.S. households spent on cooking, cleaning, and other home activities, despite the fact that the number of unemployed people increased during that time.

The paper also found that accounting for household production reduces income inequality because the amount of household production is fairly constant across all households. Since there is little difference in time spent on household activities between lower and higher income households, the effect of accounting for household production is that it raises the incomes of low-income households proportionally more than high-income households.

To learn more, read the full paper called “Accounting for Household Production in the National Accounts, 1965–2010.”